It's getting crowded in the investment crowdfunding space, and that's excellent news. Almost any asset can benefit from investment crowdfunding and, as more types succeed, that will cause still more niche platforms to launch.
At this point, everything from independent filmmaking to whistleblower lawsuits has gone the investment crowdfunding route. Broadway productions of Godspell and On The Town both got some of their funding from small investors via crowdfunding platforms. Accredited investors can help light up emerging businesses in the nascent marijuana industry via CannaFundr. And investors with a thirst for undersea adventure can dive into shipwreck recovery via Lords of Fortune.
Crowdfunding is an efficient, contemporary way to connect entrepreneurs with smaller sources of capital, in the form of individual investors. It had been percolating for most of a decade, then got a big boost with the 2012 passage of the Jumpstart Our Business Startups Act, The JOBS Act received huge bipartisan support as part of the effort to energize the faltering U.S. economy by supporting small businesses.
Some SEC rules pertaining to the legislation have been delayed and, importantly for many, the rules permitting participation by non-wealthy unaccredited investors have yet to be finalized. Nevertheless, the JOBS Act has boosted the viability of crowdfunding by relieving some of the burdens that companies operate under. Among other things, companies can have more shareholders before being required to register with the Securities and Exchange Commission, the tight control over sources of capital for many companies are loosened to include crowdfunding portals, and startups can advertise as a way of attracting investors.
$217.7 million in equity capital was crowdfunded by accredited investors in the first year after Title II of the JOBS Act was implemented in September 2013, according to Crowdnetic. That's money that makes entrepreneuring viable. It's the reason that accredited investors can now directly support oil and gas exploration, the buying of distressed mortgages and even eccentric new alternative pesticides with their money.
Startups and real estate still make up the majority of the crowdfunding ventures. However, online capital raising has also been a good source of support for our work at American Homeowner Preservation. These investments fuel our efforts to buy up broken home loans from banks at significant discounts and provide homeowners sustainable solutions to stay in their homes with reduced payments and discounted principal balances.
But there are other people being helped as well. At LexShares, the crowd of investors can help level the playing field of justice by providing the money that whistleblowers and other litigants need to take on big, deep-pocketed opponents in court. "Access to Justice is Unequal," the site proclaims. The cost of legal work is daunting; anyone who's consulted a divorce attorney at $300 an hour knows that. When it comes to undertaking a years-long court battle against a large corporation, the amounts involved are an intimidating obstacle; crowdfunding by supportive investors can bring that down to size.
Of course, investing is about maximizing one's return on capital. However, for some crowdfunding platforms, the definition of 'return' is fluid. The Miami-based shipwreck salvagers Lords of Fortune, for example, note on their website that the firm "pays out its investors and partners in-kind in treasure and/or artifacts recovered during expeditions. Such recoveries become family heirlooms, memories and stories that can be passed down through multiple generations."
Shiver me timbers. For the accredited investor who wants to be repaid in something other than doubloons, there are scores of crowdfunding opportunities, and many more to come.